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23 June, 2024
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Government grapples with energy project crisis

Chinese investors pocket €245M in energy project drama

Apostolis Tomaras

Apostolis Tomaras

The firm spearheading one of the Republic of Cyprus' most ambitious energy ventures, Terminal F.P. at Royal, finds itself grappling with challenges that threaten its completion.

The festive inauguration of construction back in the summer of 2020 now feels like a distant memory. Fast forward three-and-a-half years, and the grand project, undertaken by the Consortium China Petroleum Pipeline Engineering Co Ltd., METRON S.A., Hudong-Zhonghua Shipbuilding Co. Ltd., and Wilhelmsen Ship Management Limited, not only lags behind schedule but faces the looming specter of abandonment.

With €101 million in EU funding through the Connecting Europe Facility (CEF), Cyprus faces potential repercussions if the project stalls further. The consortium's recent seventeen-day suspension of construction has sparked concerns among subcontractors, many of whom are Cypriot entities, left unpaid by the consortium.

The government now stands at a crossroads, contemplating potential intervention to salvage the terminal's construction through Defa, the major shareholder of ETFA overseeing LNG infrastructure. With February 17 looming as a critical deadline, political deliberations are underway, with termination of the contract being a last resort. Efforts are underway to coax the Chinese consortium into fulfilling its obligations, although terminating the contract poses diplomatic challenges and logistical hurdles, including the retrieval of already-paid project assets.

Initially slated for completion by September 2022 under the terms of the December 13, 2019 contract, the terminal encompasses a Floating LNG import, storage, and re-gasification plant (FSRU), along with a mooring jetty, conduit, land pipeline, and ground installations. Despite several completion reviews, the project remains unfinished, according to the latest assessments in Nicosia.

Doubts linger regarding the contractor's performance, with technocrats questioning its ability to deliver amid numerous extensions and financial demands. Speculation swirls about the ongoing financial backing from the Chinese parent company, adding another layer of uncertainty to the project's trajectory.

Progress-wise, completion stands at 95% for the FSRU and 45% for work at the Royal. Financing for the venture involves substantial contributions from the European Commission, the European Investment Bank (EIB), and other entities, though controversy surrounds the allocation of funds to a Chinese organization. Amid ongoing disputes over payments, the consortium has received €245 million of the total budget, with further claims being contested through arbitration.

[This article was translated from its Greek original]

Cyprus  |  economy  |  EU  |  energy  |  government  |  Nicosia

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